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Do HMRC treat taxpayers equally and fairly?

Two examples where we have found this may not be the case

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I recently used the Let Property campaign for a new client who wanted to disclose 4 years worth of untaxed property income. One buy to let with a mortgage so we weren’t talking a lot of unpaid tax. This is the first time we had used this process because previously we had always just written and asked for tax returns to be issued for previous years. In most cases if the amounts are modest, we have found that no penalties are raised anyway doing it that way.

To my dismay, despite HMRC advertising these campaigns as the most favourable way for a taxpayer to come forward and disclose untaxed income, in this client’s case, despite a number of attempts we were unable to get HMRC to remove the penalties they added as part of the process. Had we just gone about it using tax returns, our client would therefore have been likely to be better off given previous experiences. How is that treating all taxpayers equally and fairly?

Then a few weeks later, another client contacted me regrading 3 years worth of unpaid child benefit charges. In this case, HMRC had prompted the taxpayer to come forward and pay the charge. Yet, no penalties were made despite the taxpayer failing to make a disclosure themselves. The amount they owed back to HMRC was more than the tax my previous client owed for the undisclosed property income, yet they got stung with a series of penalties. Again, how is this treating all taxpayers equally and fairly?

Given this experience, I’ll never use the “campaigns” process again. What are the experiences and thoughts of others and do you think there is any way for our client to come back from these penalties given that they have now signed an offer which has been accepted?

Replies (12)

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By Justin Bryant
12th Dec 2019 10:32

Why are you complaining? The BTL client seems to have been evading tax, which is a criminal offence punishable by imprisonment. A tax evader who's gone to prison for disclosing his wrongdoing would have more right to complain that he should have just got a slap on the wrist penalty.

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Replying to Justin Bryant:
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By FrogHappy
12th Dec 2019 14:22

Slightly harsh to compare a serious tax evader with a joe public property owner who doesn't understand that mortgae payments aren't fully deductible from the rental income if they include capital repayments. Most common mistake for not realising they have property income to declare.

My point was to compare a like for like taxpayer given simialar circumstances.

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By Justin Bryant
12th Dec 2019 16:32

Noted and all I am saying is your client should consider themselves lucky and not unlucky, especially when you read this:

https://www.accountancydaily.co/hmrc-raises-ps95m-through-taxpayer-plea-...

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By Rammstein1
12th Dec 2019 11:04

Penalties are charged in 99% of cases using the property disclosure correctly. I have only had one case where HMRC agreed to no penalties and that was because of a strange set of circumstances.

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Stepurhan
By stepurhan
12th Dec 2019 17:01

The main problem with your argument is you are not comparing like for like.

Your first case is someone with taxable income that they have not declared. The liability that he owes is tax.

Your second case regards income that is normally not taxable at all (child benefit) but which is repayable under certain circumstances. The liability that he owes is also not strictly speaking tax, even though it is collected through the tax system.

Is the different treatment still unfair? Possibly, but it is not the clear-cut argument you are making it out to be.

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By FrogHappy
12th Dec 2019 17:26

I agree you could look at it that way and that had already crossed my mind, but that was just a secondary example.

The other point was that other clients where we had submitted via late tax returns small amounts of undeclared income such as property income and there had been a reasonable misunderstaning by the taxpayer (albeit not a reasonable excuse), often penalties are not applied or can often be sucessfully overturned with a well written letter to explain the reasons.

The let property campaign gave no opportunity to do that, yet it is advertised as the most favourable way for a taxpayer to put their affairs in order.

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By whitevanman
12th Dec 2019 17:55

I rather suspect it will have something to do with the fact it is part of a campaign. They usually set ranges of penalties and take into account the fact that people are warned that HMRC will be looking at the specific area.
That compares with the case outside any campaign where there is a different view taken and perhaps more discretion for the officer to apply judgement.

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By Justin Bryant
13th Dec 2019 09:54

I don't have any sympathy here, as if you are rich enough to have a BTL (which let's face it, is a business), you should be able to afford a few £100s on basic tax advice re that.

Also, if there were no penalties, there would be no incentive for law abiding people to get it right 1st time - indeed it would be quite the opposite.

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Replying to Justin Bryant:
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By FrogHappy
13th Dec 2019 10:36

I have to say your staments are very sweeping and harsh. "If you are rich enough to have BTL". How do you know this person isn't in negative equity with a house they are stuck with and can't sell and has just been made redundant with no savings?

You are missing the point of the post. I am not looking for sympathy for my client.

I am looking for equality all round. Why should somebody who used the self assessment route be able to challenge the penalties and succeed, whereas the "Campaign" has not provided the same result, yet is advertised as the most favourable way to disclose undeclared income.

I put that to the case officer for this particular client and although she could see the point of view, there was nothing she could do because she had to stick to the rigidity of the campaign. The alternative would have been to start again and submit tax returns, but the costs of doing that for my client at that stage outweighed things, and may have still ended up with penalties. But at least there would have been the possibilty to get them cancelled.

I am saying that the campaign is not as fair and equal as submitting tax returns.

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Replying to FrogHappy:
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By whitevanman
13th Dec 2019 18:29

As I said in my last post (and as seems to be the case from your latest comments), it is (probably) because it is a campaign.
When HMRC commence such, they gather together a great deal of information about possible "offenders". They then invite people, generally, to consider their position and make a disclosure, if necessary. At that stage, that is the best way to proceed because, those who fail to respond will be dealt with more harshly when HMRC open enquiries etc. It is not a comparison with what might have happened before the campaign started but what would happen afterwards. Two different things I am afraid.

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Replying to Justin Bryant:
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By meadowsaw227
13th Dec 2019 11:16

Perhaps they could have taken out a "loan" and never paid it back and become even more of a serial offender !

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By sallyrichardson
18th Dec 2019 11:09

I understand your post and agree with you. I have had at least a dozen new clients in the trades (plumber, sparky) who have turned up with overdue returns. We've sorted them out, and appealed against fines with no excuse - but just a well worded "they are sorry, we're on board now - it won't happen again" and the fines have been waived.
Step up a new client who was a foreign national, does not speak good English, did not submit a return because he did not realise he had to as he was employed, but earned a lot of money. They refused to waive the fines, even though he had a very good reason that he did not file. I don't think that is fair and equal treatment. They just knew he could afford it.

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